‘Record high’: Why gold prices have surged past $4600 per ounce

More than an elegant gift, gold is a serious investment that has seen its value increase drastically. Here’s everything you need to know about the market for the precious metal.

Gold prices have risen to a record high as investors flock to the precious metal in response to escalating US tariffs and economic instability.

In February, gold prices rose by 2.9 per cent against the US dollar which dropped 3.8 per cent against index over the same period. Here’s what you need to know about gold prices and what they mean for investors.

WHY ARE GOLD PRICES RISING?

Global stock markets have faced instability in recent weeks due to concerns around US President Donald Trump’s economic policies and ongoing tariff wars.

On Tuesday, more than $35bn was wiped from the Australian sharemarket after Mr Trump refused to rule out a recession.

Gold prices are increasing because the metal is seen as a safe long-term investment, particularly in comparison to an unstable stock market.

Jordan Eliseo, general manager of ABC Bullion, said gold can remain a stable investment when political instability causes economic slowdowns and tanking stocks.

“Gold often thrives in such environments, with investors buying it in the belief it will at the very least maintain, or indeed even increase in value as it often has during periods of market turbulence,” Mr Eliseo said.

“No other asset has the track record that gold does of not only maintaining its value over the medium-long term, but increasing in value during periods where other investments are typically suffering.”

Gold investments have performed consistently in recent decades with prices rising almost 10 per cent per annum over the last 25 years.

WHAT’S HAPPENED TO AUSTRALIA’S GOLD?

Australia shipped a record amount of gold to the US in January, Bloomberg reports, as fears over incoming tariffs saw traders move metal into New York warehouses.

Australia’s gold usually moves to Asia, but more has been moved across to the US to overcome price dislocations in markets.

Exports to the US came in at $A4.6 billion in the month — the highest amount since 1995, according to the Australian Bureau of Statistics’ latest monthly trade report.

IS GOLD INCLUDED IN TRUMP’S TARIFF CHANGES?

At this stage, gold is not included and there’s no comfirmation of whether it will be or not.

WHAT DOES THIS MEAN FOR INVESTORS?

Australians are able to invest in gold through buying and selling physical gold, trading in stocks or funds that are linked to gold, or buying shares in gold mining companies.

Trading of physical gold is typically done in the form of bullion, high-purity gold usually held as a bar or coin.

It’s legal to buy and sell gold through a licensed dealer in Australia as long as it’s of investment grade, 99.5 per cent purity.

Jordan Eliseo, ABC Bullion General Manager, photographed at the company's gold smelter in Sydney in 2017. Photo: Hollie Adams / The Australian

For those who have gold items at home they’re looking to exchange for cash, it can be done through gold dealers, online stores or brick-and-mortar pawn shops.

Sydney pawn shop owner Rob Herron has operated his store in Crows Nest for more than 35 years and said in this time he’s seen the price of gold “going up steadily”.

Mr Herron said people tend to flock to gold investments “as a hedge against whatever else is supposed to be valuable in the world”.

“Gold’s the safest bet and it’s been valuable for thousands of years; it’s not likely to collapse in value so people are buying it,” he said.

Mr Herron’s store takes gold and other valuable items in exchange for short-term loans with interest payable. If the loans aren’t paid back, he said even broken jewellery that’s traded in is able to be melted down so it retains value.

Investors flock to gold when other investments such as the US Dollar or stock market appear unstable. Photo: Mandel Ngan / AFP

The items his store takes on are “mostly jewellery,” he said, as larger gold dealers can give consumers a deal that’s about 5 per cent less than the gold market price, while selling at a price about 5 per cent above.

All gold traders take a margin on their sales, buying gold slightly below market prices. Pawn shops usually offer significantly less than gold dealers at closer to half the market price of gold.

“If [consumers] have got coins and bars they tend to take it to one of the gold dealers in the city, they can give more money because they work on a big turnover,” Mr Herron said.

With increasing demand for gold as an investment, those who have gold stashed away may choose now to cash in.

“Gold is trading at over $4650 an ounce right now, which is basically a record high,” Mr Eliseo said.

“Anyone who has any real gold coins or bars, which they may have either bought or inherited or been gifted over the years, is likely sitting on a windfall gain.”